Survival Investing

My knee-jerk instinct is to laugh at survivalists. In fact, I'm forecasting an increasingly peaceful future. Still, if there's even a 1% chance of a major nuclear war in the next 50 years, doesn't it seem wise to allocate at least 1% of your permanent income to prepare for that eventuality? The marginal utility of a little extra consumption in extreme wartime conditions is almost unimaginably high. If you read Barefoot Gen, it's clear that any of the families in Hiroshima would have drastically improved their odds of survival if they had stockpiled rice ten years earlier during better times - and spread their stash over a few different locations.

So suppose you've decide to spend $3000 to prepare for the worst. What should be in your survival portfolio?

Let's say, two of those (I could probably get more calories for cheaper, but I'm spoiled). With the remaining $1400, I guess I'd buy some seeds, containers of clean water, and some kind of shelter, probably cinder blocks, and try to bury it in the ground in some place that is unlikely to be flooded.

Of course, if the disaster is nuclear, it will all be useless, and I'll likely be dead. If the disaster is flooding, then I'll wish I had a boat. If the disaster is an asteroid impact...what does one do to protect oneself from that?

1.Food, obviously the non-perishables
2.Every single pill you can get your hands on
3.penicillin, I'm allergic so it would have great comparitive advantage
4.ammo
5.5000 blueprints-i.e. design for an oil rig from 1920, or wastewater plant, or refrigerator design
6.ammo
7.cat and dog
8.pornography
9.fuel
10.ammo
11.a crapload of books and DVDs
12.soap
13.cigarettes
14.more ammo
I think I've got a pretty well thought out reason for each one. I would spend at least 1k on the ammo. Hopefully, another 1k could be spent on a decent laptop with 5,8, and 11 on it(I'm assuming outdated blue prints are probably free somwhere).

Can i offer a different thought...given that these types of natural disasters are Black Swan events (events that are by definition UNforeseeable)...buying things in advance of the catastrophy is not wise because you end up planning for the wrong event (eg. you plan for nuclear war but get the gfc instead).

i would adopt the Taleb type approach...be conservative and invest your 1% in ultra secure, highly liquid assets (eg first world government bonds or cash) and then at least when the disaster hits you got some money to spend on what you need.

As a normal good, we should expect wealthy people to spend more on survival kits. If you're worth $100 million, wouldn't $1 million dedicated towards survival in rare events have a much higher marginal utility than a slightly bigger mansion?

So another (in my opinion, more fun) question: if you had $1 million to spend on surviving events that would destroy the rest of your net worth, how would you allocate it?

The key question is not just the chance of a disaster occurring, but the chance that spending 1% of your income mitigating it will appreciably increase your chances of surviving it. In the case of major nuclear war, there is a high probability of getting killed in either the initial nuclear exchange or dying of radiation poisoning soon thereafter. That's especially likely if you live near a metropolitan area that would be a key enemy target (as both Bryan and I do). I doubt that people in such locations have more than a tiny chance of surviving for very long no matter what they do. So it's not rational to spend more than a very small sum to try to improve those odds. And even then, there are probably other expenditures that you can make that will increase your expected lifespan by far more.

I think it's impossible to plan for true Black Swans. But the one thing Americans generally underestimate is the possibility of having to relocate to another nation in the event of disaster (whether due to nature or to the economy). Most don't even have passports. And in the event that you can't afford property or substantial assets abroad, you should at least have friends who would pull for you in other countries if all hell broke loose and you had to become a refugee.

Ilya makes the point I was going to. 1% isn't the right number. The correct number is the chance that a nuclear war happens *and* you survive it, which if you live near Washington DC, seems a really remote possibility.

A world wide disaster (a disaster like a world-wide nuclear war, or a 1 kilometer diameter meteor hitting the earth) is not what you should be planning for. Consider what would happen if, for example, a nuclear device were set off in London or Tel Aviv. What might happen? Do you really think commerce would not be disrupted for any significant amount of time?

In the US, almost no one can feed themselves without Kroger or Costco. I think having a year's worth of non-perishable foodstuffs would be priority one; a way to prepare potable water without electricity would be priority two; a well-stocked first aid kit with antibiotics and a year's supply of the medications that you absolutely need to live would be priority three; a handgun and a rifle with the requisite ammunition should be priority four; a separate store of fuel for a single vehicle should be priority five. The food you can just consume and replace, the rest shouldn't be more than a 1 time purchase and probably wouldn't amount to more than 5% of an individual's income in a single year, and then you would be done stocking.

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